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Business group heterogeneity and firm outcomes: Evidence from Korean chaebols

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  • Ducret, Romain
  • Isakov, Dušan

Abstract

This study examines how business group heterogeneity affects firm outcomes using data from Korean chaebols (2007–2019). We employ a three-level empirical strategy considering: 1) market-level average effects, 2) effects across categories of business groups, and 3) group-specific effects capturing unobservable attributes. Our analysis reveals substantial variations in affiliation effects between business groups, often diverging from average market-level effects. We find that group resources significantly impact affiliate performance - investors assign higher valuations to firms affiliated with large, financially sound, and well-performing business groups. While performance effects are primarily market-driven, we document considerable heterogeneity in financial and investment policies across groups, likely influenced by unobservable characteristics such as controlling shareholders' preferences. Our findings highlight the importance of considering business group heterogeneity when analyzing affiliate performance

Suggested Citation

  • Ducret, Romain & Isakov, Dušan, 2024. "Business group heterogeneity and firm outcomes: Evidence from Korean chaebols," Global Finance Journal, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:glofin:v:63:y:2024:i:c:s1044028324001285
    DOI: 10.1016/j.gfj.2024.101056
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    More about this item

    Keywords

    Business groups; Performance; Corporate policies;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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